USDA Home Loan Eligibility

USDA Home Loan

If you’re not already familiar with the USDA home loan program, it may be in your best interest to take a minute to see if you might qualify for a once in a lifetime home loan opportunity. USDA home loans are 100% guaranteed mortgages, backed by the United States Department of Agriculture. The mission of the USDA home loan program is to assist low to moderate income families and individuals to achieve the American Dream of owning their very own home. The United States Department of Agriculture does this by partnering with local lenders, extending 100% financing opportunities, along with countless other benefits.

Advantages of a USDA Home Loans vs. FHA Home Loans

The USDA Home Loan program offers many advantages that traditional mortgage programs simply do not offer. First of all, all USDA home loans come with low interest rates, 100% financing, and require zero down payment. In fact, the USDA home loan program is the only home loan program in the country, besides the military, that requires absolutely no money for the purchase of a home. Instead, these funds can be used to pay to furnish the home, closing costs, make home renovations. USDA home loans also have very flexible credit guidelines compared to most traditional lenders, with non-traditional credit histories being accepted. FHA home loans require a minimum of 3.5% down payment and have relatively high monthly mortgage insurance premiums.

USDA Home Loan Eligibility

The USDA home loan eligibility program is designed for families looking to own a home in a USDA approved rural area. USDA approved rural areas are any area located within a rural or suburban community, or a town of less than 25,000 – 10,000 residents, depending on your area. In fact, many USDA eligible homes are not located in rural areas at all, but in small suburban communities with populations of less than 25,000 residents. Many large metropolitan cities have suburban areas that qualify for the USDA mortgage program.

Applicants must also have adequate and dependable income, and must prove that they can afford monthly mortgage payments. Because USDA home loans are designed for moderate, to low income families, there are strict income limit restrictions. To be eligible for a USDA loan, your adjusted annual household income cannot exceed 115% of the median average income for that area. Income limits vary by county and state.

USDA Credit Eligibility

While it is true that USDA home loan program offers some the most credit flexible guidelines available, you still will need to have a minimum credit score of 640 to qualify. However, some lenders may accept a credit score of as low as 580, if you can prove that some of your debts were circumstantial, temporary in nature, or beyond your control. You must also have any bankruptcies or foreclosures discharged in the last 3 years, no outstanding tax liens and no accounts that have gone to collections within the past 12 months.